The Cabinet will accord formal approval Thursday (today) to floating an international sovereign Panda Bond in the Chinese capital market to raise financing in renminbi (RMB) - commonly known as yuan - aimed at strengthening foreign exchange reserves and stabilising balance of payment position, sources close to the Finance Minister told Business Recorder.
This proposal has come under consideration after the Chinese government expressed its unwillingness to provide financing to Pakistan for improving forex reserves as it did in the past. Recently, Saudi Arabia deposited $ 2 billion in the State Bank of Pakistan (SBP) as "financial help" to improve Pakistan''s foreign exchange reserves. The UAE has announced parking an identical package in the SBP.
A technical team of the SBP had visited Beijing, following the visit of Prime Minister Imran Khan to negotiate commercial borrowing of about $ 2 billion (approximately RMB 16 billion). A senior official told this scribe that it would be finalised within a week.
It is unclear whether the proposal to float sovereign Panda Bond will be over and above $ 2 billion commercial borrowing or is the outcome of discussions between the two countries technical teams.
According to sources, the possibility of Panda Bond issuance and its likely response in the Chinese capital market in terms of issuance size, tenor and pricing has been explored in meetings with several Chinese banks, namely China Development Bank, Industrial & Commercial Bank of China and Bank of China as well as with Chinese investment management groups like China Silk Road Group, China International Trust Investment Corporation and China International Capital Corporation Limited.
The proposal has also been discussed with Chinese Securities Regulatory Commission, the main regulator of the securities industry in China and Shanghai Stock Exchange where the Panda is likely to be listed.
The sources further stated that several sovereigns like Philippines, Sharjah, Hungry, Poland and Korea have successfully issued Panda Bonds in the Chinese market in recent years.
In terms of execution, Finance Division would engage services of financial advisor(s) through an open competitive bidding process following Public Procurement Rules, 204. The exact size, tenor and price of issuance would be determined on the basis of market response received at the time of issuance.
The sources said the government has also decided to notify SBP obligations under Bai-Muajjal" as "approved securities" for Statutory Liquidity Requirement (SLR) purposes.
The SBP has highlighted that growth of Islamic banking institutions in the country is being affected as these institutions are facing liquidity development issues due to lack of Shariah compliant Statutory Liquidity Requirement eligible investment avenues. This has kept such institutions at a disadvantage compared to conventional banks which have ample supply of approved securities.
To enhance the available pool of Shariah compliant instruments, SBP has suggested that its obligations arising from Bai-Muajjal transactions be notified as approved securities for SLR purpose so as to support the growth of the Islamic banking industry.
Bai-Muajjal transactions undertaken by the government are SLR eligible under the government Bai-Muajjal Financing Facility, 2015, the sources said, adding that declaring SBP''s Bai-Muajjal obligations as SLR eligible, would, therefore, bring them in line with similar obligations of the government.
The Cabinet will consider following proposal of different Ministries ; (i)
supplementary grant for Pakistan Steel Mills (Finance Division) ;(ii) NoC for the acceptance of Foreign Awards "The Order of the Rising Sun, gold Rays with Neck Ribbon" and "The Order of the Sacred Treasure, Silver Rays" to Abdul Kader Jaffer and Nasreen Abid, respectively by the Government of Japan; (Foreign Affairs Division); (iii) approval for supplementary grant in favour of Higher Education Commission; (Ministry of Federal Education & Professional Training, Federal Education & Professional Training Division); (iv) request for supplementary grant of Rs 50 million for FIA; (Interior Division); (v) repatriation/appointment of Presiding Officer in the Intellectual Property Tribunal, Lahore (Law & Justice Division); (vi) approval of the Cabinet for Singing of MoU between the Government of the Islamic Republic of Pakistan and the Government of the State of Palestine on Cooperation in the field of health and medicine; (vii) ratification of recommendations of Cabinet Committee for Disposal of Legislative Cases (CCLC) in respect of Pakistan Trade Control of Wild Fauna and Flora Rules, 2018; (Climate Change Division); (viii) renewal of Mobile Cellular Licenses in 2019; (Information Technology); (ix) extension in time line for registration of mobile devices under DIRBS; (Information Technology & Telecom Division); (x) determination of underserved areas under Rule 2(XXIV) of USF Rules 2006 needed for the launch of Next Generation Broadband in Underserved Areas of Pakistan; (Information Technology & Telecom Division: and (xi) emolument of Chairman & Members National Electric Power Regulatory Authority (NIPRA); (Cabinet Division).